Republished from Dr. Ed Yardeni’s blog: “Dr. Ed’s Blog”

The current emerging markets crisis didn’t just start last week. It’s been going on for a while, and should come as no surprise to investors. Argentina’s peso has plunged 18.9% y/y. South Africa’s rand is down 5.7%. Turkey’s currency has been a turkey since 2008. The following have been running trade deficits for the past year or longer (with the latest 12-month deficits in parentheses): India ($155 billion), Indonesia ($6 billion), Philippines ($8 billion), Turkey ($97 billion), and Ukraine ($14 billion).

During the emerging markets crisis of 1997, the S&P 500 rose 31.0% that year with only one brief correction amounting to 9.6% early that year. There was a more significant correction of 19.3% in 1998 after the Russian ruble crisis and mostly in reaction to the collapse of LTCM. Yet the S&P 500 rose 26.7% that year.

History doesn’t repeat itself, but it does rhyme. The notion that an emerging markets crisis is bearish for the US stock market isn’t confirmed by the experience of 1997. Recessions are bearish for stocks. So far, it’s hard to see how the current emerging markets crisis triggers a recession in the US.